This account represents a house which it was agreed should be built for Mr. Black for $2,500, that amount being included in the mortgage which he has given, and which was placed originally to the credit of this account. On completion the house is found to have cost $2,572.50, the excess of $72.50 being a loss to the company.

This loss having been already incurred and the amount (as is usual in such cases) being inconsiderable, it is charged direct to Profit and Loss. It would have been equally correct to have charged it against Gain on Sales, but a great number of such cross-entries would tend to obscure the Gain on Sales account and it is better to charge such amounts off direct.